(Recasts, adds yen rate in last paragraph)
KUALA LUMPUR, July 26 (Reuters) - Sales of motor vehicles in Malaysia surged 20 percent in the first half as the economy recovered, prompting carmakers and distributors on Friday to more than double their full-year growth forecast.
The Malaysian Automotive Association, a grouping of the country's major auto manufacturers and traders, said vehicle sales rose to 219,141 units in the first six months from 182,222 in the same period last year.
"A lot of our members were surprised. We didn't expect a 20 percent growth," said association president Aishah Ahmad.
The buoyant first half, which followed growth of 16 percent in all of 2001, was enough to convince the normally cautious association to raise its forecast of three percent growth for this year to eight percent.
That would lift sales to a record 430,000 units from 396,381 last year, marking a return to highs last seen before the country was struck by the Asian financial crisis in 1998.
"Last year was a strong year and this year is strong," Aishah told a news conference. "Two years in a row is a very good sign for the auto industry."
Besides a strengthening economy, improving consumer confidence and aggressive marketing by car companies have also boosted demand, along with low interest rates.
Finance companies have slashed rates to a flat 4.5 percent per annum for five-year hire-purchase packages, half the rate offered during the 1998 recession.
The pattern of car owners replacing vehicles every five to six years will also boost sales this year as demand peaked in 1997, the association said.
BIG BUYERS
Sales in excess of 400,000 this year will cement Malaysia's dominance as the leading motor vehicle market in Southeast Asia.
Malaysia's 23 million people are the third biggest buyers of passenger cars in Asia-Pacific behind Japan and Korea, Aishah said.
Passenger car sales, which rose 21 percent to 182,706 units in the first half, are forecast to rise nine percent to 358,000 for the year.
National carmakers Proton and unlisted Perodua, protected by government tariffs of up to 300 percent on rival foreign brands, maintained their combined 92 percent market share.
In the commercial vehicle segment, sales rose 29 percent in the first six months and are expected to expand by eight percent for the full year to 40,500 units.
Sales of four-wheel drives are projected to rise at a slower rate of one percent to 31,500 units after zero growth in the first half.
The association brushed aside concerns that the strengthening Japanese yen could force local car companies to raise retail prices to protect profit margins.
Some carmakers including Proton are heavily dependent on components and technology imported from Japan, but many have already hedged their requirements three to four months in advance.
"So, it will be at the end of the year before any impact is felt," said Aishah. "I don't see the likelihood of prices going up right now."
Pegged at 3.8 to the dollar, the Malaysian ringgit has weakened to 10-month lows against the yen.